SEC charges Justin Costello and David Ferraro for securities fraud and posing as billionaire veteran
The Securities and Exchange Commission charged Cannabis executive Justin Costello and David Ferraro, an associate of Costello’s, for promoting the stock of several microcap companies on social media without disclosing their own simultaneous stock sales as market prices rose.
Justin Costello used a false persona, as a Harvard-educated military veteran and hedge fund billionaire, to defraud investors out of millions of dollars.
Sheldon L. Pollock, Associate Regional Director of the New York Regional Office, said: “As we allege in the complaint, Costello brazenly used fictitious accomplishments to win over investors and directed numerous manipulative stock promotion campaigns. This case highlights our ongoing efforts to protect investors from fraudsters posing as investment professionals and to safeguard the markets from social media schemes and other online fraud.”
Justin Costello posed as billionaire to raise $900,000 for Cannabis projects
Allegedly portraying himself to the public as a seasoned, licensed investment professional who was building a conglomerate in the cannabis industry, Justin Costello included fake credentials as a Harvard MBA, experience managing a $1.15 billion hedge fund, and years of experience on Wall Street.
He used his fake persona to secure approximately $900,000 of investments in two different companies from more than 30 investors.
Costello and Ferraro engaged in penny stock scheme
As an investment advisor to a married couple, he sold them $1.8 million of shares in a penny stock at a markup of 9,000 percent over the price paid by Costello and used their $4 million brokerage account to trade, at a significant loss, securities of microcap companies in which Costello had an undisclosed financial interest.
Costello and Ferraro engaged in various stock promotion schemes using penny stocks and social media. The complaint alleges that Ferraro posted hundreds of tweets to hype those stocks and did not disclose that Costello intended to sell his shares once the stock price increased or that Ferraro would receive a share of Costello’s profits. Through these alleged schemes, Costello and Ferraro together made approximately $792,000 in illicit trading profits.